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Active income is income for which services have been performed. This includes wages, tips, wages, commissions, and income from businesses in which there is material participation. Passive or Residual income is an income obtained on a regular basis, with very little effort needed to maintain it.
Portfolio income is income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and is not earned through normal business actions. Normally, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move in the ones which we think will be the most difficult to create to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a platform that you do not run and then get compensation based on when the merchandise is purchased or used. Most of us do not have the potential to quickly create royalty streams.
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This is the most straightforward type of passive residual income, if you can attain it. .
6. Network Marketing: Network marketing is a unique business model and has made more millionaires than any other business. The industry as a whole is growing and more companies are trying to leverage referrals or direct sales to increase revenue and market products. On the other hand, the industry as a whole is confusing to many and requires a tremendous amount of mental and emotional fortitude to make residual income possible.
The effort you must put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it has considerable price and you must continuously make and cultivate content and value. The income is residual and combines devotion and education with community.
A good book that explains this model of residual income is The automated Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription versions and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks what you like and showing them where to receive it. As a Dad, I tried 3 high seats before finding the Bumbo. websites Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system to optimize and profit from the passion.
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3. Business: As I mentioned, not all businesses are created equal when it comes to residual income. Lets take a look at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn steak taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally I am going to earn a fee if I go in or not. Sure, I must maintain relationships to keep earning that commission, but truly the income is residual because once I sign up one client I am going to make money off of their money perpetually.
Why do we call these the Electricity 2 Because these require less specialization and experience, and with the leveraged use of smart debt, can work web together.
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2. Real Estate: Property is 2 for one reason, leverage using intelligent debt and other peoples money. When looking at real estate rents and the potential for income property provides, it's the trifecta of residual income. First, a house or rental house can enjoy, therefore capital appreciation is your very first long-term benefit of owning a visit the website home.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and updates to the home.
The fourth and possibly most hidden, however important benefit is that over time rents grow, protecting your cash-flow against inflation, although your mortgage interest can be in a fixed rate potentially. .
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1. The final and most effective form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore I am going to leave that for your investment side. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.